The market prepares for the end of the month flows, and the Non-Farm Payrolls report due out on Friday.
Wednesday marks the end of the trading month, so volatility is expected to rise during the main end of the month flows. Summer trading conditions have taken over the market after the main central banks delivered their message for the period ahead. As such, the focus now shifts to the Non-Farm Payrolls report due out on Friday, and the Jackson Hole Symposium in August.
Equity markets like subdued volatility. Traditionally, whenever the VIX index declines and remains at low levels, the equity markets are bid. Last week, the Nasdaq 100 and the S&P500 indices made several all-time highs.
Europe followed closely. The main European indices started the trading week close to their recent highs, with the FTSE100 index in the United Kingdom holding above 7,100 points, and the DAX in Germany hovering above 15,600.
Crude oil’s price reached $74 recently. Later in the trading week, the OPEC+ meeting is critical for the price of oil, but even at these elevated levels it remains bid. Gold and silver recovered some of the lost ground but was still unable to claw back much of the ground lost in the last couple of weeks.
The calendar for the rest of the trading day is extremely light. Only the FOMC member Williams’ speech might bring something new, but it is unlikely that we will see significant changes in the price action. As such, trading today is just a waiting game ahead of the end of the month flows and the NFP report later in the trading week.
Markets to Watch
Gold, USD/JPY, AUD/USD – markets in focus today.
Gold remains weak as it consolidates in a horizontal pattern. The price action resembles a head and shoulders formation, and a break and close below 1,750 should spell trouble for bulls.
The daily timeframe on the USD/JPY pair points to both a reversal and a continuation pattern. On the one hand, the market has a hard time extending the rally above 111, so we may end up seeing a double top formation. On the other hand, on any move lower, the pair managed to hold the higher lows series, suggesting a possible ascending triangle might be in the cards. As such, more patience is needed before acting on any of the two patterns.
The AUD/USD pair is back to horizontal resistance after it broke lower following the Fed’s message from its last meeting. Traders still monitor a possible head and shoulders pattern, and the recent move higher might be just the neckline’s retesting.
Winners and Losers
US equities remain strong as pointed by the futures market; the US dollar remains weak, sold on every bounce.